The Art of War

“If you know the enemy and know yourself you need not fear the results of a hundred battles.” — Sun Tzu

“The purpose of art is washing the dust of daily life off our souls.” — Pablo Picasso

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We’re back in the City of Lights, Fellow Reckoner, La Ville-Lumière. The hot and dusty Medina of Marrakech is behind us. So too the coastline of Portugal and the cities of Seville and Madrid. But what is ahead…for Europe…for the world?

While in Spain’s capital, we went to the Museo Reina Sofía — part of the city’s famed “Triangle of Art.” The walls are full of oddball paintings, including collections by Gris, Miró, Dali and, perhaps most notably, Picasso. We wandered the grand columnades…until we came upon a small, reverent crowd, gathered around the latter’s masterpiece, Guernica. Depicting the artist’s impression of the Bombing of Guernica by German planes during the Spanish Civil War, the work is enormous and chaotic, full of disjointed limbs, corporal convulsions, faces howling in agony and beasts trampling them under hooves. It is meant to be a reminder of the tragedy of war…and to stand as a symbol of peace.

But outside this quiet room, beyond the building’s walls and across the imaginary lines of the Triangle of Art, a dangerous unrest grips the people once again. The continent, once united, backs turned against a bloodied, war-torn century, now finds itself coming face to face with a creeping disquiet.

On the surface, the discontent seems to be bubbling around the financial crisis…and the various governments’ reactions to problems largely caused by…well, various governments. The PIIGS nations, as is well reported, are broke. Their debt is bad. Rotten. It cannot be repaid…at least not in a viable currency.

All manner of promises have been made…and broken…and remade. The latest, in which the European Central Bank announced a bond-buying scheme not entirely dissimilar to the “Print, baby! Print!” shenanigans of the US Federal Reserve, were supposed to quell the crowds. As much cash as is “needed” was the message…as if lending more to borrowers who can’t repay hasn’t proved a sufficiently-exhausted experiment.

Of course, ECB President, Mario Draghi, has warned that the cash would come with “strict and effective” conditions for countries that use it. But not all Europeans have the same definition of “strict and effective.” And almost no European country likes their own definition challenged…not from within…and certainly not from abroad. It’s part of the problem of running a “United States of Europe,” as former Spanish PM Jose Maria Aznar noted:

“A United States of Europe is an impossible idea. It is a very serious mistake to try to destroy the nation states. You cannot go against the cultural beliefs of the people and the forces of history.”

As it happens, nation states are pretty good at destroying not only each other, but also themselves.

We were able to witness a slice of this firsthand when we awoke to the sounds of chanting protesters and police sirens just this past Sunday. Below our hotel room, along Madrid’s Gran Via, marched a few thousand disgruntled, placard-waving Spaniards.

“They are in from the provinces,” the hotel duty manager, who had come down to get a look at the scene, announced in a gruff tone, “and they are here to protest cuts in their local government programs. They’re not drastic cuts, mind you, as they would have everyone think.

“For example, say they have two towns, two small towns of about one thousand people each. Well, the government has grown so large, at all levels, in this country, that each of these two towns would have their own mayor, their own committees and their own ridiculous bureaucracy. Part of the austerity measures’ aim is to cut that down to size, to consolidate positions and peel off wasteful programs and inefficiencies in the system. But these people want things done the old way, the easy way, where they get paid for doing nothing of any real importance.

“Many of these people have never worked a real day in their life,” he continued between puffs on his cigarette. “They march along here, stopping traffic and getting in the way. They do this two or three times a week. Today’s march is a relatively small one…only a few thousand. A few months ago the streets were packed all the way up to the Puerta del Sol.

“The problem is, there’s no way to sustain the old way. There’s no money. Just wait to see what happens when they realize there is no way back…only forward. Then they’ll really be out in force. You probably won’t want to be here when that happens. We’ve seen it here before. It’s not nice.”

Joel Bowman is a contributor to The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.

These suckers have dragged down the entire market for months. It’s been a tale of two Dows. The Dow Jones Transportation Average has dropped more than 8% on the year. But the Dow Jones Industrial Average has just about broken even over the same period. That shows you just how bad the trannies have been.

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